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> Taxing land will be passed through 100% to the renter Replies like this genuinely confuse me. How do you think rent prices are set now? I’ll tell you, they’r

> Taxing land will be passed through 100% to the renter Replies like this genuinely confuse me. How do you think rent prices are set now? I’ll tell you, they’re generally set to maintain a given occupancy rate, which is to say, they’re set as high as the market allows. The market being a group of renters which make an income, of which landlords generally take a third or more. If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven. The rents wouldn’t budge. Any claim otherwise requires it be the case that there’s capacity to raise rents that landlords aren’t currently utilizing, i.e. that landlords are undercharging renters en masse. I have never seen evidence in support of such a claim.

genewitch 1y ago
Let's assume what you say is true. Then the reason it's impossible in the US is because landlords would do everything in their power to stop it, because they'd be the ones eating the cost.
- nmhancoc 1y ago
  I don’t think so, actually. Real estate is a pretty small sector of the economy (maybe 13 or 14% of GDP according to Google. That’s about as much as manufacturing, but not politically unassailable. The real reason these sorts of reforms will never kick in is that roughly 2/3 of Americans are in owner occupied housing, it’s the largest asset on most of their balance sheets, and an LVT will in many cases effectively zero that out. So it’s the homeowners (particularly the older cohorts) which will vote against this policy to the detriment of the younger cohort.
  - chgs 1y ago
    Old rich people want young working people to pay for their lives. No surprise there.
    - actionfromafar 1y ago
      I wonder what may happen when that generation fades away.
      - sokoloff 1y ago
        Old and young are late-bound. I don’t think any of this is particular to nor confined to a specific generation.
        actionfromafar 1y ago
        I just meant that, at this time, there is big cohort of old people living in large (and largely empty) houses.
        sokoloff 1y ago
        That’ll be true when my generation is old and when yours is old as well. My house is well sized for our family of four. I don’t plan to move out when the kids go to college nor as long as I’m able to live independently. People who don’t like that are entitled to their opinion but not to my acting in accordance with their wishes.
        actionfromafar 1y ago
        Thanks, I understand now. That makes sense. It may be though that as the older generation shrinks, the newer generation enacts new zoning regulations. That could change the composition and mix in current residential areas now dominated by large single family houses.
      - chgs 1y ago
        Wealth that isn’t concentrating on the 1% will be diluted as part of inheritance. Those from a poor background will continue to be screwed no matter how well they are doing. Tabitha who makes clogs for shitzus as a job (standard person on uk real Estate shows) will co time to live rent free massive houses while those working and living in the cities massive rent and commuting will do tie to pay far more tax.
  - sokoloff 1y ago
    Which amounts to: “We propose to fix this problem by seizing the value embodied in the homes of 2/3 of Americans, while leaving their mortgages intact.” That being not politically tenable is a feature of democracy, not a bug.
    - AnthonyMouse 1y ago
      It is kind of a bug, because otherwise how do you fix it? Housing got set up as a pyramid scheme where the price keeps going up because supply is constrained, so younger people have to take out ever-bigger mortgages in order to have somewhere to live. Nobody wants the prices to be unaffordable until they buy a house, but once they do they're locked in to the high price they bought in at and want prices to go up even more. When you have a majority of people on the hellbound side of the line then you're locked into a death spiral that violently explodes once the prices get so high that the majority can no longer afford a home.
      - sokoloff 1y ago
        There are many other forms of government which are less subject to the influence of the people and their silly preferences. If you don’t want to switch forms of government, formulating a holistic plan, addressing weaknesses in the plan, laying out how the transition will work, educating the people about it, and convincing them why your plan is better is what I’d recommend.
        AnthonyMouse 1y ago
        The general problem is the "democracy is two wolves and a sheep voting on what's for dinner" thing. If you can get at least 51% of people to vote for "I've got mine" then you've created a system of injustice. Which is nominally why we use a republic rather than a direct democracy. But those checks and balances have been eroded over time, or weren't strong enough to begin with, so then the majority e.g. votes to constrain new construction because they value their own short-term financial gain over the greater harm they're causing to the minority. And then the same dynamic plays out for some other issue, but this time you're in the minority and you take -50 damage instead of a +10 gain. So the problem is that it's in everyone's interest to stop this from happening in general, but only in the minority's interest to do it on any particular issue, and democracy in and of itself isn't structured to handle that.
protocolture 1y ago
>they’re set as high as the market allows. Huge red flag, this isnt the case. It isnt a perfectly liquid market. >If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven. No of course not, the process would probably take 12 months, as home owners identify their losses, and instruct rental agencies to end leases and increase prices. Accepting that while the house might be on the market for longer than usual, attracting a higher income tenant and getting them to sign for term is going to long term resolve the new hole in their budget. >that landlords are undercharging renters en masse. I have never seen evidence in support of such a claim. I am living this discussion right now. So this is amusing me. I rented my current property in 2020 for 320 p/w. It was probably worth 400 p/w I had a handshake agreement with the rental agency that they would leave the price where it is, and I would complete as much maintenance myself before raising a fuss. In 2022, the owners had to sell the property to pay for medical treatment. The old owners had no mortgage, and loved having a fixed stable income. Their biggest risk was having the property untenanted for any length of time. So they left the price alone while the world moved on. The new owner has raised the rent every 12 months since. The previous owners sold at a massive gain, and the new owner was struggling to pay the mortgage. My calculation based on sale price is that their mortgage payments were in excess of 380 p/w and, considering the sale grandfathered my no maintenance agreement, are looking at considerable maintenance costs. Current cost to me is ~500 per week. Issues: Market is currently roughly (we have big discussions about this) permitting 520 - 540 pw for similar properties. My barrier is that its a substantial cost to move. So I negotiate all the price rises with the real estate in terms of property improvements. If they saw a taxation increase imposed by an LVT, they would not hesitate to pass it on to me over 12 months. I would have to reevaluate the costs to move. If the same increase occurred roughly evenly across where I want to live, I would probably just have to make it work. I cant go anywhere to avoid the LVT increase, and it costs money to relocate. I would have to further erode my spending in other areas to account for it. And I could. This really comes back to what the LVT is designed to do. Its designed to enforce the most efficient use of the land. The outcome is intrinsic to the goal. The land is not being used most efficiently (I rue the day that my landlord figures out that we have the exact amount of land required to battleaxe the block, turning my backyard into another property) which for humans, as opposed to spherical cows, is actually fantastic in a lot of cases. Under an LVT my landlord would be required to run the property in the most taxation efficient manner, which is counter to my interests as a renter. But yeah, the rental market is not liquid. There's costs to move. Costs for having the property on the market untenanted for significant time. Costs to bring a property up to spec between renters etc etc. And lots of people live in that gap. To the point where our local real estate industry body actually issued guidance to real estates that they should raise the rent as frequently as possible because it wasn't getting done very often, suppressing prices.
AnthonyMouse 1y ago
> How do you think rent prices are set now? I’ll tell you, they’re generally set to maintain a given occupancy rate, which is to say, they’re set as high as the market allows. "What the market allows" is affected by taxes. Suppose the risk-adjusted return to investing in real estate in some area is equivalent to the overall market, and rents are currently $1000/mo. Then if new people move into the area, rents start to go up from higher demand, but that brings rents above the overall market rate of return, which makes it profitable for developers to invest money in building new buildings, which increases supply to match the increase in demand and acts to mitigate the increase in rents. Now suppose you raise taxes on property ownership, so that to match the overall market rate of return, rents would have to be $1500/mo in order to cover all the existing costs plus the new taxes. Then nobody is building anything new until rents hit $1500/mo, because new construction isn't profitable until then. So when new people move in, there is an increase in demand but no corresponding increase in supply, and that persists until rents get above $1500/mo. By which point the renters are paying the new taxes. Notice that this is effectively the same thing that happens when you impose restrictive zoning rules like single family zoning. They effectively act as a tax because now you have to buy a lot more land for each housing unit you want to add, so the cost of construction goes up and rents with it.
- chii 1y ago
  > So when new people move in, there is an increase in demand but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal). So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium. A new tax on the land will cause the owner to obsorb it, and under that equilibrium assumption above, they will not be able to raise the rent to compensate. Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer.
  - AnthonyMouse 1y ago
    > but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal). People move into places where there are jobs. All else is not equal, because other places don't have those jobs. Notice that higher rents correlate with population growth. Under your theory, if rents went up, shouldn't the local population decline rather than increase? Also notice that the overall population increases over time as a result of births and immigration, and that existing structures are occasionally damaged in various ways and have to be renovated or rebuilt. The result is that the steady-state is rents going up unless you have active investment in new housing. > So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium. "What the market will bear" is supply and demand. If you add costs to supplying more housing, supply won't increase until the price matches the new costs. It changes the intersection point with the same demand curve. > Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer. Your assumption is that renters can't pay higher rents. It's that they won't pay higher rents if lower rents are available, which is caused by competition between landlords and increases in supply from new construction. Take that away and people have to outbid each other for the now more constrained number of units, and then people have to pay higher rents and have it come out of their other spending, or take on more debt. Because you pay for housing or you're homeless.
Ekaros 1y ago
>If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven. The rents wouldn’t budge. Isn't idea of LVT to replace other taxes? Like income tax. So they would get more capacity as their other tax burden would be lesser. Obviously if it was entirely new additional tax it would take more time for rents to creep up.

genewitch 1y ago

Let's assume what you say is true. Then the reason it's impossible in the US is because landlords would do everything in their power to stop it, because they'd be the ones eating the cost.

nmhancoc 1y ago
I don’t think so, actually. Real estate is a pretty small sector of the economy (maybe 13 or 14% of GDP according to Google. That’s about as much as manufacturing, but not politically unassailable. The real reason these sorts of reforms will never kick in is that roughly 2/3 of Americans are in owner occupied housing, it’s the largest asset on most of their balance sheets, and an LVT will in many cases effectively zero that out. So it’s the homeowners (particularly the older cohorts) which will vote against this policy to the detriment of the younger cohort.
- chgs 1y ago
  Old rich people want young working people to pay for their lives. No surprise there.
  - actionfromafar 1y ago
    I wonder what may happen when that generation fades away.
    - sokoloff 1y ago
      Old and young are late-bound. I don’t think any of this is particular to nor confined to a specific generation.
      - actionfromafar 1y ago
        I just meant that, at this time, there is big cohort of old people living in large (and largely empty) houses.
        sokoloff 1y ago
        That’ll be true when my generation is old and when yours is old as well. My house is well sized for our family of four. I don’t plan to move out when the kids go to college nor as long as I’m able to live independently. People who don’t like that are entitled to their opinion but not to my acting in accordance with their wishes.
        actionfromafar 1y ago
        Thanks, I understand now. That makes sense. It may be though that as the older generation shrinks, the newer generation enacts new zoning regulations. That could change the composition and mix in current residential areas now dominated by large single family houses.
    - chgs 1y ago
      Wealth that isn’t concentrating on the 1% will be diluted as part of inheritance. Those from a poor background will continue to be screwed no matter how well they are doing. Tabitha who makes clogs for shitzus as a job (standard person on uk real Estate shows) will co time to live rent free massive houses while those working and living in the cities massive rent and commuting will do tie to pay far more tax.
- sokoloff 1y ago
  Which amounts to: “We propose to fix this problem by seizing the value embodied in the homes of 2/3 of Americans, while leaving their mortgages intact.” That being not politically tenable is a feature of democracy, not a bug.
  - AnthonyMouse 1y ago
    It is kind of a bug, because otherwise how do you fix it? Housing got set up as a pyramid scheme where the price keeps going up because supply is constrained, so younger people have to take out ever-bigger mortgages in order to have somewhere to live. Nobody wants the prices to be unaffordable until they buy a house, but once they do they're locked in to the high price they bought in at and want prices to go up even more. When you have a majority of people on the hellbound side of the line then you're locked into a death spiral that violently explodes once the prices get so high that the majority can no longer afford a home.
    - sokoloff 1y ago
      There are many other forms of government which are less subject to the influence of the people and their silly preferences. If you don’t want to switch forms of government, formulating a holistic plan, addressing weaknesses in the plan, laying out how the transition will work, educating the people about it, and convincing them why your plan is better is what I’d recommend.
      - AnthonyMouse 1y ago
        The general problem is the "democracy is two wolves and a sheep voting on what's for dinner" thing. If you can get at least 51% of people to vote for "I've got mine" then you've created a system of injustice. Which is nominally why we use a republic rather than a direct democracy. But those checks and balances have been eroded over time, or weren't strong enough to begin with, so then the majority e.g. votes to constrain new construction because they value their own short-term financial gain over the greater harm they're causing to the minority. And then the same dynamic plays out for some other issue, but this time you're in the minority and you take -50 damage instead of a +10 gain. So the problem is that it's in everyone's interest to stop this from happening in general, but only in the minority's interest to do it on any particular issue, and democracy in and of itself isn't structured to handle that.

protocolture 1y ago

>they’re set as high as the market allows. Huge red flag, this isnt the case. It isnt a perfectly liquid market. >If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven. No of course not, the process would probably take 12 months, as home owners identify their losses, and instruct rental agencies to end leases and increase prices. Accepting that while the house might be on the market for longer than usual, attracting a higher income tenant and getting them to sign for term is going to long term resolve the new hole in their budget. >that landlords are undercharging renters en masse. I have never seen evidence in support of such a claim. I am living this discussion right now. So this is amusing me. I rented my current property in 2020 for 320 p/w. It was probably worth 400 p/w I had a handshake agreement with the rental agency that they would leave the price where it is, and I would complete as much maintenance myself before raising a fuss. In 2022, the owners had to sell the property to pay for medical treatment. The old owners had no mortgage, and loved having a fixed stable income. Their biggest risk was having the property untenanted for any length of time. So they left the price alone while the world moved on. The new owner has raised the rent every 12 months since. The previous owners sold at a massive gain, and the new owner was struggling to pay the mortgage. My calculation based on sale price is that their mortgage payments were in excess of 380 p/w and, considering the sale grandfathered my no maintenance agreement, are looking at considerable maintenance costs. Current cost to me is ~500 per week. Issues: Market is currently roughly (we have big discussions about this) permitting 520 - 540 pw for similar properties. My barrier is that its a substantial cost to move. So I negotiate all the price rises with the real estate in terms of property improvements. If they saw a taxation increase imposed by an LVT, they would not hesitate to pass it on to me over 12 months. I would have to reevaluate the costs to move. If the same increase occurred roughly evenly across where I want to live, I would probably just have to make it work. I cant go anywhere to avoid the LVT increase, and it costs money to relocate. I would have to further erode my spending in other areas to account for it. And I could. This really comes back to what the LVT is designed to do. Its designed to enforce the most efficient use of the land. The outcome is intrinsic to the goal. The land is not being used most efficiently (I rue the day that my landlord figures out that we have the exact amount of land required to battleaxe the block, turning my backyard into another property) which for humans, as opposed to spherical cows, is actually fantastic in a lot of cases. Under an LVT my landlord would be required to run the property in the most taxation efficient manner, which is counter to my interests as a renter. But yeah, the rental market is not liquid. There's costs to move. Costs for having the property on the market untenanted for significant time. Costs to bring a property up to spec between renters etc etc. And lots of people live in that gap. To the point where our local real estate industry body actually issued guidance to real estates that they should raise the rent as frequently as possible because it wasn't getting done very often, suppressing prices.

AnthonyMouse 1y ago

> How do you think rent prices are set now? I’ll tell you, they’re generally set to maintain a given occupancy rate, which is to say, they’re set as high as the market allows. "What the market allows" is affected by taxes. Suppose the risk-adjusted return to investing in real estate in some area is equivalent to the overall market, and rents are currently $1000/mo. Then if new people move into the area, rents start to go up from higher demand, but that brings rents above the overall market rate of return, which makes it profitable for developers to invest money in building new buildings, which increases supply to match the increase in demand and acts to mitigate the increase in rents. Now suppose you raise taxes on property ownership, so that to match the overall market rate of return, rents would have to be $1500/mo in order to cover all the existing costs plus the new taxes. Then nobody is building anything new until rents hit $1500/mo, because new construction isn't profitable until then. So when new people move in, there is an increase in demand but no corresponding increase in supply, and that persists until rents get above $1500/mo. By which point the renters are paying the new taxes. Notice that this is effectively the same thing that happens when you impose restrictive zoning rules like single family zoning. They effectively act as a tax because now you have to buy a lot more land for each housing unit you want to add, so the cost of construction goes up and rents with it.

chii 1y ago
> So when new people move in, there is an increase in demand but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal). So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium. A new tax on the land will cause the owner to obsorb it, and under that equilibrium assumption above, they will not be able to raise the rent to compensate. Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer.
- AnthonyMouse 1y ago
  > but the presumption that there will be a stream of people moving in is false. The people would just not move to a place with high rent (all else being quite equal). People move into places where there are jobs. All else is not equal, because other places don't have those jobs. Notice that higher rents correlate with population growth. Under your theory, if rents went up, shouldn't the local population decline rather than increase? Also notice that the overall population increases over time as a result of births and immigration, and that existing structures are occasionally damaged in various ways and have to be renovated or rebuilt. The result is that the steady-state is rents going up unless you have active investment in new housing. > So high rents will lower the incoming demand. Aka, the current rent is almost always the max the market will bear, regardless of people moving in (or out) - so you can assume it's at some sort of equilibrium. "What the market will bear" is supply and demand. If you add costs to supplying more housing, supply won't increase until the price matches the new costs. It changes the intersection point with the same demand curve. > Unless, the new tax has an equal and opposite tax credit to renters! Who now have more money, and would be able to accept a higher rent as they've become slightly richer. Your assumption is that renters can't pay higher rents. It's that they won't pay higher rents if lower rents are available, which is caused by competition between landlords and increases in supply from new construction. Take that away and people have to outbid each other for the now more constrained number of units, and then people have to pay higher rents and have it come out of their other spending, or take on more debt. Because you pay for housing or you're homeless.

Ekaros 1y ago

>If we implemented a LVT tomorrow, the renters don’t get additional capacity to pay rent as mana from heaven. The rents wouldn’t budge. Isn't idea of LVT to replace other taxes? Like income tax. So they would get more capacity as their other tax burden would be lesser. Obviously if it was entirely new additional tax it would take more time for rents to creep up.